SGX Issues Technical Specifications To Brokers For Marking Of Short-selling Orders

On December 7 the Singapore Exchange Limited (SGX) took another major step towards increased market transparency by making compulsory, marking of all short-selling orders. SGX has provided the technical specifications to its members to facilitate this effort. In consultation with the Monetary Authority of Singapore (MAS), SGX will institute marking of short-selling orders in the first half of 2010. In addition, statistics of aggregate short-selling activity for each individual security will be published daily.

The measure follows a November 2008 public consultation paper issued by SGX on efforts to enhance the transparency of short-selling activities. The feedback received showed that most respondents supported the proposed marking of short-selling orders and the publication of short-selling data.

MAS and SGX will institute the necessary legislative and regulatory framework to effect the measure. More details on the proposed legislative and regulatory changes will be made available in due course.

The salient features of the measure are:

1. Definition and Scope: A short-sell order is defined as any sell-order where the seller does not own the quantity of shares sold at the time of placing the order. This includes covered short sales, where the seller has borrowed the shares prior to placing the sell order, for the purposes of delivery to the buyer. The proposed measure will apply to all securities listed on SGX-ST, with the exception of Extended Settlement (ES) contracts.

2. Obligations: All clients of brokers will be required to declare to their brokers whether a sell-order is a short-sale at the point of placing the order. Brokers will be required to convey such information to SGX-ST on behalf of their customers at the point of order entry. SGX-ST will consolidate and publish the aggregate short sold volume and value per individual counter, based on the short sale orders which are filled, before the start of the next trading day.

The proposed measure seeks to improve the transparency of the extent of aggregate short-selling activities in individual securities. The enhanced transparency may potentially provide additional input for market participants in making their investment decisions, and could also help deter manipulative conduct.

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